There’s no denying how serious the student loan debt crisis has become. In the U.S., 45 million borrowers collectively owe nearly $1.6 trillion in student loan debt. Student loan debt is now the second-highest consumer debt category – behind mortgage debt.
With nearly 40 million Americans laid off as a result of the coronavirus pandemic – it’s safe to say that student loan borrowers are struggling financially.
To help manage your student loan payments during this uncertain time, follow these steps:
Grasp the CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act has provided relief for borrowers with federally held loans. Specifically, the act suspended federal student loan payments, reduced interest rates on federal student loans to 0%, and paused federal student loan debt collection on defaulted student loans through September 30, 2020. So, according to the CARES act, borrowers with federally held student loans do not have to make payments through September 30, 2020, and interest will not accrue.
Unfortunately, this relief act does not apply to commercially held federal loans, Perkins loans, and private loans. Plus, September is right around the corner, and borrowers will have to resume making payments.
Understand repayment plans
Once temporary relief programs end, managing student loan debt is doable with the right information. When you understand repayment options — standard plans, extended plans, income-based plans, and other payment options – you feel more in control. Visit studentaid.gov to learn more about repayment plans.
Contact your student loan servicer
Reach out to your loan servicer to explain how the coronavirus has impacted you. Most have a page dedicated to COVID-19 that explains borrower options and how to contact the company.
Private lenders may be willing to offer you a 60-90-day payment forbearance, waive fees, or a new payment plan to keep your account in good standing. Though, keep in mind that forbearance will allow you to skip payments for a few months, but interest will continue to accrue. That interest may even be “capitalized,” or rolled into the unpaid principal – ultimately, increasing the cost of your loan.
Get flexible with your budget
If you are receiving a form of financial assistance during the health crisis such as skipped or reduced payments for other monthly expenses, consider putting that money towards student loan payments. Every little bit helps to keep your account in good standing and avoid late fees.
Free financial counseling
Whether you are struggling or thriving financially, it can help to get guidance from expert financial counselors.
Our partner, GreenPath Financial Wellness, offers free financial counseling. Their NFCC-certified (National Foundation for Credit Counseling) counselors can help you get a clear understanding of student loan debt. Free debt counseling is available over the phone with no appointment necessary. Visit Greenpath.com to get started.
With a little effort, it could be possible to pay back your loans while enjoying a happy and healthy lifestyle.